Hiring of permanent staff fell in the UK capital for the third month in a row in December but temporary billings continued to grow.

The Purchasing Managers’ Index (PMI) UK Report on Jobs: London, showed that although permanent job hiring numbers fell in London, it was at a softer rate than previously.

The report, by KPMG and the Recruitment & Employment Confederation (REC) said while redundancies or layoffs were reported, companies noted the first increase in supply of permanent staff since April 2021, while ongoing labour and skill shortages meant firms continued to bump pay.

There was also a further moderation in rates of both starting salary and temporary worker wage inflation in December.

The report said the uptick in temporary workers was in part linked to greater demand, but the growth was at a slower rate than November and earlier in 2022.

However, the number of candidates available for short-term roles fell in London during the last month of the year, with market uncertainty, Brexit and skill shortages all linked to the decline.

Recruiters in London said there was a fall in permanent staff vacancies across London, the first since February 2021.

The rate of temporary job vacancy growth remained weaker than the national average and the seasonally adjusted index was above the 50.0 threshold, which indicates economic, for the first time since April 2021.

Salary rates for permanent staff softened for the third consecutive month and was the softest recorded since the current 22-month run of increases, which began in March 2021.

Recruiters across London noted the weakest rate of growth in starting salaries, similar to the ongoing moderation in starting salary growth, temp wages also rose at a softer rate in December.

The pace of wage inflation was the weakest since June 2021, but the latest uptick was strong overall as increased competition for staff and the higher cost of living drove up average hourly wages.

Average hourly wages grew at a softer pace across all four English regions during December, with all areas reporting weaker rates of growth than their respective historical averages.

REC chief executive Neil Carberry said: “A slowdown in permanent placements is not unusual in December.

“Recruiters tell us that this was because firms pushed hiring activity back into January in the face of high inflation and economic uncertainty.

“The big test of the labour market will come this month.”

Carberry said it is still a good time to get a job with salaries awarded to newly-placed permanent staff rising sharply in London.

“As we move into 2023, the need to ensure our labour market can deliver economic growth and prosperity should be a critical concern to politicians.

A stable economy and support to address labour and skills shortages – from welfare to work support to immigration and skills reform - need to be major priorities for all the UK governments.”

Jobs outside London

Across all four regions monitored by the PMI, there was an increase in temporary staff billings in December, with the strongest expansion in the South of England.

In the North of England and the Midlands, permanent job placements declined. In the South of England, there was a faster fall in permanent job placements than previously, with permanent vacancies declining for the first time since November 2020, but temporary billings continued to rise.

Temp staff availability fell across all four monitored English regions, with the North of England registering the quickest downturn.

(Reporting by Imogen Lillywhite; editing by  Seban Scaria)